"Restore(s) a little sanity into current political debate" - Kenneth Minogue, TLS "Projects a more expansive and optimistic future for Americans than (the analysis of) Huntington" - James R. Kurth, National Interest "One of (the) most important books I have read in recent years" - Lexington Green

Advertising

Chicago Boyz is a member of the Amazon Associates, B&H Photo, Newsmax and other affiliate programs. Your Amazon and B&H purchases made after clicking those businesses' links, and your clicks on Newsmax links, help to support this blog.

Some Chicago Boyz advertisers may themselves be members of the Amazon Associates and/or other affiliate programs and benefit from any relevant purchases you make after you click on an Amazon or other link on their ad on Chicago Boyz or on their own web sites.

Chicago Boyz occasionally accepts direct paid advertising for goods or services that in the opinion of Chicago Boyz management would benefit the readers of this blog. Please direct any inquiries to

Copyright

Chicago Boyz is a registered trademark of Chicago Boyz Media, LLC. All original content on the Chicago Boyz web site is copyright 2001-2017 by Chicago Boyz Media, LLC or the Chicago Boyz contributor who posted it. All rights reserved.

Archive for the 'Entrepreneurship' Category

“Access, Access, Access” Rick Perry repeated to Bret Baier. It seemed a grilled candidate’s non sequitur to Baier’s question: weren’t many Texans uninsured? But I was struck by its truth. Insurance is of little use if no doctors take it, no medicine is available, deductibles and premiums are unmanageable. Positive rights – to food, to medicine, to jobs – are not rights. The theory never stands up to experience.

Perry’s run was brief; now, his task is encouraging access to energy – of all kinds. Trump seemed an example of excess – still is, I guess. But a nation not just energy independent but energy dominant is one empowered, free. And we can free others: a Europe not beholden to Russian oil is a healthier Europe. Neither Trump nor Perry invented fracking nor could Obama stop its success. But this administration respects it, clears the way for its natural flow.

Access, access, access – how much does access to energy change our lives each day? How many are alive today because of access to energy forms unknown or at least unused 300 years ago? (Without air conditioning, I would have left my husband years ago. Then, again, he might have come with me.) Consider, though, the other extreme: we would be shocked to hear of elderly couples found frozen in the depth of winter, not uncommon in other times and places. How much more food is generated because of cheap energy? How broadly is food distributed?

James L Taylor Manufacturing, a 106-year-old company making clamps and other woodworking tools sold to producers of furniture, flooring, and cabinets, recently introduced a robotic nester…it replaces the work of a human nester who “snatches boards coming off a conveyer belt in random lengths, hastily rearranges them so that each row of one to five pieces is so long, and bundles the rows into a stack.” One mill in Mississippi placed an urgent order for 3 of these (at $115K each) with the explanation: “I have eight nesters and four of them just called in sick.”

What is especially interesting about this is that the robotics system was not developed by hiring consultants from MIT or Silicon Valley; the company’s chief engineer (also part-owner of the company) designed the machine himself and wrote the 7000 lines of C++ code to run it. Reminds me of the cucumber sorting machine developed by a Japanese guy to help out on his parents’ cucumber farm..although that system was developed for the family’s own use rather than as a saleable product as with the robotic nester.

Elsie the Contented Cow was created in 1936 first as a cartoon corporate logo for the Borden food products line; a little brown Jersey cow with a daisy-chain necklace and a charming anthropomorphic smile. Three years later, a live cow was purchased from a dairy farm in Connecticut to demonstrate (along with several other likely heifers) the Borden Dairy Company-invented rotary milking parlor – the dairy barn of the future! in the Borden exhibit at the 1939 World’s Fair. The live Elsie, originally named You’ll Do Lobelia (no, I did not make up this bit) came about because an overwhelming number of visitors to the exhibit kept asking which of the demo-cows was Elsie. Of the cows in the show, You’ll Do Lobelia was, the keeper and administrator of the dairy barn agreed – the most charming and personable of the demonstration cows, especially for a generation of Americans who had moved on from a life of rural agriculture and likely never laid eyes on a real, live cow. So, Lobelia/Elsie was drafted into service for commercial interest (much as young American males were being drafted at about the same time for military service). Elsie, her assorted offspring, spouse (Elmer the Bull – the corporate face of Elmer’s Glue) and her successors continued as the public face, as it were – for the Borden Dairy Company, appearing in a movie, even – and the Macy’s department store window, where she gave birth to one of her calves. Her countenance adorns the labels of Eagle Brand condensed milk to this day.

Jamie Dimon of JP Morgan is, IMO, one of the more thoughtful of the financial industry CEO’s. In his annual letter to shareholders, he devotes considerable space to the current situation of the United States–our assets, our problems, and potential paths for improvement. The public policy section of the letter starts on page 32.

My view of several issues is different from Mr Dimon’s, but I think the letter is well worth reading and thinking about.

Ivanka Trump, mother of three and stunning in a sheath, introduced her father at the Republican Convention. Many argue his kids seem great – certainly they appear loyal, attractive, alert, and sensible. But be that as it may. Both Adams and Franklin disowned sons. For most of us, raising children will be our most consequential task and Trump seems to be doing reasonably well. But it’s a thin reed.

Still, that dress! It represents what moved country after country out of poverty. Causes of that respect across class lines and the rise of a large middle class and greater health for all are complicated: some see the Bible in the vernacular, some see the marriage of the Great Awakening with the Enlightenment, Dutch and English traditions, sea routes. Surely living longer and with more health meant more productivity. Others rightly prize a concept motivating these views, that each has within the divine. Such a belief emphasizes human rights – the free market of commerce, of ideas, of innovations, of speech, of religion. Honoring the dignity and virtuous habits of the bourgeoisie led to a respect for everyman and everyman’s talents. It was huge, that change from 1700 to 2100. And a signifier is a presidential hopeful in the most powerful nation introduced by his daughter in that blush pink dress.Read the rest of this entry »

In my two previous blog posts here and here I talked of a new extended flow oil fracking technique coming on-line that resulted in a lot of drilled uncompleted wells (DUC) and the population of such wells (~5,000). In the comment section of one of those columns I speculated that we have a top end on oil prices where “turn on a dime fracking” will cut in at a price point of $50 a barrel

We now have a “flaming datum” for that speculation, oil having just bumped -HARD- into the $50 a barrel roof for world oil prices. The 5,000 DUC Frack-log is being activated with — I strongly suspect — the new extended play oil fracking technique.

It is being reported in various places that the US rig count jumped from NINE RIGS in mid-May to 325 last week and there was no change from 325 rigs this week. That is a 36 fold increase in rig count in a week!!

Based on figures I’ve gotten from those in the industry, the range of production you can expect from those wells, depending on the geology, length of the laterals (6,000 to 8,000 feet) and the number of fracking stages (200′, 300′ or 400′) will result in initial barrel per day production of between 400 and 800 barrels a day per fracked well (with a very, very rare 1,300 barrel a day play from time to time). So we are looking at between 130,000 to 260,000 barrels a day of American oil fracking production arriving in the next few months.

Compared to Saudi production, 130,000 to 260,000 barrels of oil a day represents between 1.3% and 2.5% of the Saudis’ daily oil flow. The number of DUCs activated to provide that production amount to 6.5% of the frack-log. And all that for what amounts to Zero “CAPEX” (capital expenditure), plus the operating expenses of worker wages, the rental price for existing, out of service, oil fracking rigs, and oil tanker trucks to move product to rail heads or oil pipelines.

Now you know why the Saudis didn’t agree with OPEC oil production cutbacks this week. The Saudis maxing out their oil production is no longer about stopping American oil frackers. The Saudis’ long term regime survival strategy amounts to being the “Last Petro-State Standing.”

The Saudis — like everyone else inside the Big Oil economic paradigm — simply cannot compete with that sort of rapid to market, low cost & low risk oil. The Saudis’ highest priority now is to keep their customers as long as they can, because if they lose them they may never get them back.

‘Who controls the past,’ ran the Party slogan, ‘controls the future: who controls the present controls the past.’ ~George Orwell, 1984

Controlling our view of the past – even our view of the present – is an obsession with the Progressive Left. Our understanding of history deeply influences our thinking and philosophy. Among other things, it shapes our view of both the morality and social-economic effects of free market capitalism versus socialism.

To that end, a group of enormously successful people from the 19th century were demonized by turn of the century Progressives and have continued to be demonized as The Robber Barons by Leftist historians in primary school and college texts ever since. More subtly, through dark Orwellian references in Leftist entertainment programs and media, they have been thoroughly maligned in the popular imagination as well. Yet few people know who these people actually were and what, for better or worse, they actually did in their lives and how their works affected our lives even today. In his book, Robert Folsom sets out to take fresh look at people we would today call entrepreneurs.

It’s steps like this that move the space program forward. Notice this wasn’t done by NASA or ULA or the ESA. It was done by a private company that didn’t exist 15 years ago. 37 minutes, including the launch, recovery of the 1st stage, and deployment of the Dragon capsule.

BTW, very cool to me that Spacex did not require the help of a traditional media company for any of this. And it’s actually much better than anything they typically produce. In addition, the people in this video are in the Hawthorne, California, SpaceX facility where these rockets are designed and produced. They designed and built this rocket. And they’re watching it perform almost real time. How amazing is that?

They are mostly Sanders supporters. And they feel oppressed by the industry that they are in, and especially by the VCs who fund the companies where they work. Here’s the complaint of a 26-year-old software engineer:

“They sell you a dream at startups – the ping-pong, the perks – so they can pull 80 hours out of you. But in reality the venture capitalists control all the capital, all the labor, and all the decisions, so yeah, it feels great protesting one.”

“Tech workers are workers, no matter how much money they make,” said another guy, this one a PhD student at Berkeley.

Now, one’s first instinct when reading this story–at least my first instinct–is to feel contempt for these whiners. Most of them are far better off financially than the average American, even after adjusting for the extremely high costs of living in the Bay area. And no one forced any of them to work at startups, where the pressures are well-known to be extreme. They could have chosen IT jobs at banks or retailers or manufacturing companies or government agencies in any of a considerable number of cities.

Looked at from a broader perspective, though, the story reminded me of something Peter Drucker wrote almost 50 years ago:

They assume that primary care will be delivered by nurse practitioners and physician assistants. They are probably correct as we see with the new Wal Mart primary care clinics.

The company has opened five primary care locations in South Carolina and Texas, and plans to open a sixth clinic in Palestine, Tex., on Friday and another six by the end of the year. The clinics, it says, can offer a broader range of services, like chronic disease management, than the 100 or so acute care clinics leased by hospital operators at Walmarts across the country. Unlike CVS or Walgreens, which also offer some similar services, or Costco, which offers eye care, Walmart is marketing itself as a primary medical provider.

This is all well and good. What happens when a patient comes in with a serious condition ?

The health policy “experts” have been concerned to train “lesser licensed practitioners” and have pretty much ignored primary care MDs except to burden them with clumsy electronic medical record systems that take up time and make life miserable.

I repeatedly ask medical students if they would choose a career in primary care if it would completely erase their student loan debt. A few hands go up, but not many. In fact, for a while now, the federal government has dedicated millions of dollars to repaying loans for students who choose primary care. Yet residency match numbers show that the percentage of students choosing primary care is not increasing. Though loan forgiveness is a step in the right direction, medical students realize that by choosing a more lucrative specialty, they can pay off their loans just fine.

I proposed years ago, a health reform that resembled that of France where medical school is free. It could be arranged that service in primary care, low income clinics would give credit against student loans. Nothing happened. Except physician income has declined. And tuition has increased.

I’ve posted on Chicago Boyz and other blogs before, but it was a long time ago. Most of it was my work on the Clausewitz Roundtable. I’ve commented here and there, too. I’m happy to count Zen Pundit and Lexington Green as close blog-friends of many years.

I’m back. Some has changed, but not much. I’m still an active-duty US Marine Corps Officer. I’m a major now, not a captain. I’ve been to the sand box a few more times since I last posted an actual blog here. I’ve deployed more than most for my time in service, but less than some. I’m not complaining, just saying.

One thing did happen on my last deployment, in the end of 2014. Toward the end of deployments it’s not uncommon for things to slow down–lots of waiting for things to happen. So you have time to think. In that thinking I started to really question what the hell it is that I’m doing. Why am I fighting? What is it for? I suppose it’s connected to the fact that I was rounding out my fourth deployment to Afghanistan, and doing my small part to assist the Marine Corps with the turnover of Helmand Province to the Afghan National Army 215th Corps. I had deployed to Afghanistan in 2004, 2010, 2012-2013, and then 2014. Throw in an Iraq deployment, some time at sea with the Navy, and some other exercises, and you start to see the makings of a military career in early 21st century America. In any case, I was leading a unit and had a good amount of responsibility. But why? Why had the US come here, made the decisions it did, and why was it now trying to leave? And likewise, why was my Marine Corps doing the same thing? And me? Why was I a part of that?

I have no real regrets about the service rendered for my country. The cost has certainly been steep, personally, though. The family, with each deployment, goes through a great deal of stress, and after about three such deployments, they get harder, not easier, for the family and the soldier to handle. I’ve also lost more friends than I care to count (I can count them out for you, I just don’t want to). There are other costs which are borne, too. But the remuneration has been decent, I suppose. We always managed to be somewhat comfortable. Maybe that was the problem…the comfort?

Part of the expression of gratitude the country has for its military is the pay. For an officer, especially, the pay is quite good. I’m not going to tell you the amount of pay and allowances–that’s publicly available elsewhere. But suffice to say that the military has been quite shielded from the fears and losses of the great recession. Enlisted men and women do well, too, and can occasionally do very well when it comes times for reenlistment in specific occupational fields. Expenses have always been reasonably less than income, on average. There’s been no pressure from the economic environment to really think about my family’s financial situation today, let along 10 or 20 years from now. Yet something just wasn’t right. I didn’t feel out of control, but I didn’t feel like I was in charge, either. I had a bit of a feeling of being adrift. The military side of things was very much in control of the situation–I always knew precisely how many people were under my charge, their individual strengths and weaknesses, their state of training and discipline, and their morale. I knew the capabilities of my equipment. I always strove to understand the mission, to lead with vigor, and to “own” my position. I was good at that. But personally and financially? I barely had a financial or a personal life. That had to change.

So I decided to get a handle on things. I started to track every penny–even the pennies I don’t see because they’re “pre-tax” and given to the government for safe keeping until I claim my share back at tax time. I located all of my accounts. I found all of the debts, the interest rates, the amount of interest I was paying. I started tracking expenses, and then cutting them. I’ll be honest–the wife wasn’t exactly thrilled by me looking at things with such magnification. I started to read up on personal finance, investing, and life-planning in general. I read blogs and books, listened to podcasts, and talked with others about how to really order finances these days. And I began to radically alter our financial course. We paid all our debts, we bought a house (so, in actuality, we have one mortgage now). We’ve rented out our basement to a tenant. And we now save about 40% of all our pre-tax income. We’re not where I want to be yet, but we’re getting there. I’m not leaving anything to chance any longer, unless it’s a calculated chance intentionally taken. Every expense is now deliberately taken.

I also decided to look for some hobbies. Being a military man has a way of becoming an all-encompassing experience. Your friends are basically military colleagues. Your work is military work. Military people know about “mandatory fun”–those obligatory nights spent with comrades and often with superiors. Your wardrobe is decided for you. Where you live is decided. My task was to carve out a bit of this life and make it mine. I had to get new friends and do new things with different groups of people. That would add richness to my life. I’ve done that, and I’m still doing that.

I’ve been working on the above things–redirecting our financial life and reordering how I spend time–for a bit over a year now. The changes have been pretty dramatic. Looking back, I realize that up until I took command of my life I was living in a bit of a fog. With all of the turmoil of military life, the American people do much to make finances reasonably tranquil. This financial tranquility is both a blessing and a curse. You’re never really forced to grapple with the default decisions the consumerist economy makes for you. Nor are you forced to grapple with the reality that politics is not really national. It’s local. Your political power begins with you and those you immediately affect. You need to reclaim that power for yourself. Take charge of the fruits of your labor. Own your day to the extent you can. If you want to descend into the cesspool of national politics, fine–but do it intentionally. In fact, live your life intentionally. A life, intentionally lived, taken to the logical extreme, is the very definition of freedom. That is why I fight, happily, for my country.

I’ll be blogging about my financial journey here, as well as on other things as I see fit.

A society as huge and complex as the United States can run economically only on the basis of acceptance and trust. This has been true for so long it is no longer noticed, like the air. People accept the rules and generally follow them whether or not there is a policeman in attendance. …. All over the the land people go about their business secure that arrangements will be honored and carried out. A high-trust society is a low-cost society.

Of all that has changed over the last decade in the general culture of the United States, I wonder if a widespread loss of trust in the political, media, intellectual and bureaucratic establishments is the most quietly catastrophic of all the damage done to our society of late. It is axiomatic that once trust in an individual, a friend or a spouse is lost, it can almost never be regained; one of those things which is easily, almost casually done, never to be completely repaired. I suspect that we will discover over the next few decades that the thinking and observing portion of our society will never regain that unthinking trust in our institutions, now that we have seen them become weaponized in open and politically partisan ways. We have observed the national news media become politically partisan, more intent on hiding matters of significance than informing the public about them. What doesn’t appear above the fold, so to speak, or even in the back pages is sometimes more revealing. And the hate for ordinary American citizens in flyover country, frequently expressed by those residents of the wealthy bicoastal enclaves has been mind-boggling. There are personalities who have been so casually offensive in this regard that I have made it a point to avoid patronizing with my pocketbook anything that they have had anything to do with. I suspect that I am not alone in this – it’s another element of that ‘cold anger’ that I wrote about some days ago. How has it come to be that the so-called ruling elite of a nation now appear to hold their fellow-citizens in such deep contempt? (This contempt has begun to be returned with interest of late, although the ruling elites are predictably mystified by such quiet demonstrations as in the Chick-Fil-A appreciation day, the failure of certain lavishly promoted moves and TV shows, and heavily attended Tea Party rallies of a few years ago.)

Most here haven’t commented on the darting and illusory fortunes of the huge Republican field; I’d mentioned earlier that Perry would have trouble – double or triple BDS syndrome, a bit too much of an Aggie for Texas, God knows for the rest of the country. But that great t-sipper, Kevin Williamson, discusses the case for Perry after a strong speech. That’s worth reading and both Williamson & Perry are worth while.

Perry’s fighting, turning arguments around to free market principles, to the human: he did this earlier on the relatively friendly Fox’s Chris Wallace. Wallace pressed him on the number of uninsured Texans. Perry didn’t fight him on those grounds but on the far more important, far more serious, and far more consequential grounds of “access.” Access in Texas to health care has risen sharply with Perry’s policies. And, let’s face it, if there is enough access, all the assurances of insurance are pretty useless. Or, as Venzueleans found out, Chavez had promised to meet their every need – government promises of toilet paper and oil were there, access was not.Read the rest of this entry »

Granny Jessie kept chickens during the Depression – quite a lot of them, if my childhood memories of the huge and by then crumbling and disused chicken-wire enclosure, the adjoining hutch and the nesting boxes are anything to go by. Some of her neighbors went on keeping backyard livestock well into the 1960s – we occasionally sampled goose eggs at Granny Jessie’s house where we could hear a donkey braying now and again. Mom had to help care for the chickens, as child and teenager – and wound up detesting them so much that this was the one back-yard DIY farm element that we never ventured into when we were growing up. Mom hated chickens, profoundly. It seems that keeping chickens is one of those fall-back things, when hard times loom.

But my daughter and I were considering it over the last couple of years, along with all of our other ventures into suburban self-efficiency – the garden, the cheese-making, the home-brewing and canning, the deep-freeze stocked full, the pantry likewise. I put off doing anything about chickens until two things happened: we finally encountered the woman in our neighborhood who keeps a small flock of backyard chickens, and she took us to see her flock. She told us that it was not much trouble, really, and the eggs were amazingly flavorful. In comparison, supermarket eggs – even the expensive organic and supposedly free-range kind were insipid and tasteless.Read the rest of this entry »

(This is a slightly reworked piece I did for a local real estate blog, which alas seems to have gone dormant – enjoy! CH)

For much of the 19th century and into the early Twentieth, it was a popular San Antonio custom. Various of the public squares, notably Military Plaza and Market Square were the domain of the Chili Queens who established a custom of setting up tables and benches along the edges of the squares, in the early evening and selling chili-by-the-bowl to all comers. They would bring huge kettles of chili which they had made over their own home cook-fire during the day, and keep it warm through the evening and into the wee hours over an open fire. The chili vendors would entice customers to their own particular stands by hiring musicians to entertain diners. There are some splendid descriptions of how marvelous this would have appeared – lantern and starlight shining down on the tables, gleaming on glass soda bottles, while the scent of the chili and the mesquite smoke from the fires which kept it warm hung on the night air. (I used this scene several times in Lone Star Sons, and in Adelsverein – The Sowing.) During South Texas summers before the invention of air conditioning, this likely would have been about the most comfortable dining venue for working men, for those out for an evening of gambling and drinking in the various saloons … and in later decades, for those visiting from the North or the East, desirous of absorbing a little exotic local color.

(Part one is here.)
All righty – everyone still interested? This is the rest of the story, of Fred Harvey and his hospitality empire, which not only is given popular credit for ‘civilizing’ the Wild West, but also for supplying that stretch of the Southwest between the Mississippi-Missouri and the Sacramento with excellent food and drink, splendid service, and a constant stream of wives – for many of the women recruited as waitresses in the track-side station restaurants married right and left; to railroad men, co-workers in the Harvey establishments, and to customers they met in the course of their duties. A comparison between Harvey Girls and stewardesses in the glamorous days of commercial flight has been made now and again; both groups were composed of relatively young, independent and adventurous women, carefully selected and trained, and working in a setting where their attractive qualities were shown at an advantage.Read the rest of this entry »

The event was well-attended. I attribute this in part to the drawing power of the free buffet of Indian food, and not exclusively to the appeal of the speaker. The students were attentive and asked good questions. I understand that audio of the talk will be available at some point. I will post a link when it is available.

He was the entrepeneur who came up with the bright idea to bring fine cooking and peerless customer service to the rowdy far West, and do so on a grand scale … and as a sidebar to that feat, also supplied thousands of wives to settlers in an otherwise female-deficient part of the country. He was a Scots-English immigrant from Liverpool named Fred Harvey. He arrived in New York at the age of 17, early in the 1850s. He took up employment washing pots and dishes at a popular restaurant of the day, and within a short time had worked up the kitchen ranks to waiter and then line cook. He only remained there for a year and a half – but in those months he had learned the restaurant business very, very well. He gravitated west, but only as far as St. Louis, where he managed a retail store, married and survived a bout of yellow fever. The restaurant business called to him, though. On the eve of the Civil War, he and a business partner opened a café. Which was successful, right up until the minute that his business partner, whose sympathies were with the Confederacy, took all the profits from the café and went South. Read the rest of this entry »

Jim Clifton, who is Chairman & CEO of Gallup, presents data showing that creation of new businesses has fallen considerably over a long-term trend running from 1977 to the present, and that for the last several years, the number of firms created has actually fallen below the number of firms closing.

The U.S. now ranks not first, not second, not third, but 12th among developed nations in terms of business startup activity. Countries such as Hungary, Denmark, Finland, New Zealand, Sweden, Israel and Italy all have higher startup rates than America does.

Read the whole thing.

These numbers and trends seem somewhat counterintuitive to me. I see a lot of startups looking for angel funding, and quite a few of them getting it. There is a lot of public interest in entrepreneurship, as evidenced by the success of TV programs such as “Shark Tank”, and even universities are attempting to capitalize on the interest in entrepreneurship by offering courses and programs on the topic.

I suspect that much of the decline in business creation is among people who don’t have a lot of formal education–many of them immigrants–and who in former years would have started businesses but are now inhibited by inability to navigate the dense thicket of regulations and pay the substantial costs involved in doing so. OTOH, I also suspect that quite a few of these people have actually created businesses, in fields such as home maintenance or home day-care, and are doing so off-the-books in ways that don’t get counted in the formal statistics.

Among those who do have college degrees–and especially among those who have spent six, eight, or more years in college classrooms–student loan debt, much of it incurred on behalf of degrees having little or no economic or serious intellectual value, surely also acts as an inhibitor to business creation.

As Jonathan pointed out here, one problem with the blog format is that worthwhile posts tend to fade into the background over time, even when they might be of continuing value. One approach I’d like to try is Theme roundups, in which I’ll select a number of previous posts on a common topic or set of related topics, and link them with brief introductory sentences or paragraphs. At least initially, I’ll focus on my own posts.

The posts in this second “theme” roundup focus on issues affecting productivity and economic growth.

Energy, Productivity, and the Middle Class. The primary driver of middle class affluence has been the availability of plentiful and low-cost energy…especially in the form of electricity…coupled with a whole array of productivity-increasing tools and methods, ranging from the horse-drawn harvester to the assembly line to the automated check sorting machine.

Demographics and productivity growth. Slowing population growth is of concern in just about every developed county because of the effects on worker/non-worker population mix. Economist Michael Mandel presents a country-by-country analysis of the productivity growth rates required, in light of these demographics, to achieve a doubling of individual income by 2050. (from 2005)

The Innovator’s Solution. My review of the now-classic book by Clayton Christensen and Michael Raynor. Far more valuable than most books on business strategy.

Closing time? Citigroup (this is from 2010) listed “ten themes that spell the end of Western dominance,” while Joel Kotkin challenged what he called “declinism.”

Entrepreneurship in decline? Michael Malone, who has been writing about technology and Silicon Valley for a couple of decades, worries (in 2009) that the basic mechanism by which new technologies are commercialized–the formation and growth of new enterprises–is badly broken. (Malone’s original article has disappeared, but I excerpted part of it.)

Decline is not inevitable. Many Americans have come to believe that our best years are behind us. I assert that American decline is by no means inevitable…and if we do wind up in long-term decline, it will be driven not by any sort of automatic economic process, but rather by our own choices–especially our own political choices.

Models, predictions, and forecasts are always wrong, or, more accurately, they’re never completely right. That’s obvious since the map can never truly be the territory. Some are better than others, but no matter how hard we try and how much information that we gather, we’ll never construct a representation of reality better than the real thing. That being the case, forecasts therefore reveal more about ourselves and our present state of mind than anything about the future.

The Research Feature in the fall issue of the MIT Sloan Management Review, “Beyond Forecasting: Creating New Strategic Narratives” (link here – requires a one time registration – or purchase Kindle article here for a few dollars), concerns a certain type of forecasting called scenario planning. The authors studied a tech company that was being hit hard during the 2001 economic crash and needed to find new strategies to navigate the rough seas ahead.

Their research revealed that

“future projections are intimately tied to interpretations of the past and the present. Strategy making amid volatility thus involves constructing and reconstructing strategic narratives that reimagine the past and present in ways that allow the organization to explore multiple possible futures.”

These explorations of possible futures, more commonly referred to as scenarios, are stories intended to describe possible futures, identify some significant events, main actors, and motivations, and convey how the world functions.

The authors note that constructing forecasts based on these methods usually doesn’t work very well because the future is uncertain and often unfolds in a way that is very different from current trajectories. The current paths are comfortable and familiar, so they are difficult to deviate from. Constructing scenarios of the future actually first requires constructing paths that connect the past, present, and future. The narratives are those paths.

”In comparing strategy projects within CommCorp, we found that the more work managers do to create novel strategic narratives, the more likely they are to explore alternatives that break with the status quo. In other words, to get to an alternative future, you have to create a story about the past that connects to it.”

Predicting, prognosticating, and prophesying have been around since time immemorial. The modern version of strategic scenario planning can be attributed to Herman Kahn at the Hudson Institute and his “thinking the unthinkable” about nuclear war by taking into account non-linear, disruptive changes that lead to an uncertain future. The first to bring scenarios into the business world was the pioneering strategy guru Pierre Wack at Shell Oil who coined the term. Wack was a colorful and imaginative individual who took Kahn’s insights and repurposed them to affect the quality of judgment rather than quality of predictions.

Among the many books, case studies, and articles on the Shell planning department, I just completed The Essence of Scenarios: Learning from the Shell Experience, a history of the scenario group culled from interviews of former members. Pierre Wack helped found it and headed it throughout the 1970s. The book concerns the entire history from then until the present, but it devotes a large part to Wack’s work and legacy.

In contrast to Kahn’s theories, Wack was less concerned about decoding uncertainty or getting predictions right and more concerned with making future uncertainty more relevant to the present situation.

“Wack was interested in scenarios as a way to ‘see’ the present situation more clearly, rather than as a basis for knowing about the future. The value of the scenarios is not in better forecasting what ‘the’ future will be, but in encouraging already smart people to learn by ‘seeing’ the present situation afresh, from the perspective offered by plausible, alternative futures , in a process that Wack termed ‘disciplined imagination’.”

With an emphasis on present adaptation instead of future clarity, their first attempts happened to be nicely prescient. Their November 1971 scenarios covering “Producer Government Take/World Economic Development” and their January 1973 scenarios for “Impending Energy Scarcity” presented different tracks for oil prices including: a low slow growth scenario based on the continuation of past agreements with producer countries, a track that the corporate leadership expected; and a high price growth scenario which factored into concerns that producer countries were reaching limits to how much more capital inflows they could absorb.

These scenarios involved explorations for prices through the late ’70s into the early ’80s. It’s important to keep in mind that, in keeping with the notion that they weren’t meant to be exact predictions, the high price track scenario still ended up being off by a factor of 20 as oil embargoes and inflation pushed prices higher than anyone could have imagined. Despite the fuzziness of the numbers, however, presenting a possible future far off from what was expected shifted thinking outside the company’s comfort zone.

There was some initial skepticism from top executives, but the scenario planning helped the company to think differently and conditioned them to adjust in flexible ways that they wouldn’t have considered previously. Consideration of the high price track eventually led to Shell investing in nuclear and coal which helped offset the political turmoil and price shock that would arrive in the mid ’70s.

“In October 1973, the first oil crisis began to unfold, and the entire organization became aware of the possibilities that scenarios offered. The 1973 scenarios report had provided a new frame of reference – the mindset of the oil producer countries. This new frame was significantly different from the usual analytical frame – the mindset of an oil company. The scenarios had enabled Shell executives to rehearse the future as a thought experiment rather than a crisis exercise. When the crisis actually occurred, Shell was able to collectively re-interpret the turbulent situation and to respond much faster than its competitors.”

In order to be taken seriously, the Shell scenario team had to relate to top management how the oil producers’ situation related to their own situation.

“In September 1972, Wack gave what those present remember as a three-hour, enthralling performance that was based on an image of the six scenarios as a river forking into two streams, each of which divided into three tributaries. The insight about hither oil prices and possible energy crisis… were integrated into one of these scenarios.”

This technique demonstrated the narrative of how the high price scenario was linked to Shell’s operations and how it could have sprung forth from Shell’s past. The key was teasing out the culture, values, and qualities of the past that could make that future plausible.

Similar re-interpretations of the past are what the MIT researchers found were most successful for their tech company. It wasn’t that they provided better predictions, but it helped provide a unifying vision and get everyone to buy into course changes that didn’t seem to fit before.

“the crash in the market for its existing products had forced everyone at CommCorp to reevaluate the company’s historical strategic trajectory. This questioning enabled one manager to reinterpret CommCorp’s history, not only as a provider of big-ticket hardware for the backbone of the Internet but also as a provider of communications technologies across the whole network. By seeing the company as all about “communications,” the manager was able to propose a project for improving access at the “last mile” of the network. This reinterpretation made a radical shift in a future vision possible: CommCorp could provide small-ticket, standardized products as well as customized, high-end technologies.

The narratives and scenarios became a way to define the company as it was today and illustrate a more coherent organizational structure. This is possible because of the rich potential of examining the past.

“strategy making is not about getting the ‘right’ narrative. It’s about getting a narrative that is good enough for now, so that the organization can move forward and take action in uncertain times. This recognizes that strategy will in some ways always be evolving and “emergent.”

Everyone loves to try to make predictions, but the real value lies in re-evaluating the past and restructuring past trajectories to provide for a launching point to navigate into the future. This “re-programming” the past is the way to deal with an uncertain future. Instead of forecasting futures that merely extrapolate from the status quo or futilely fighting future models that conflict with conventional mental maps, the use of narratives, scenarios, and strategies provides ways to create stronger and more harmonious models of the present.